WASHINGTON – The Earned Income Tax Credit is a federal benefit program for families whose earned income falls below set thresholds – in 2006, $32,001 for a married couple with one child, $36,348 for a married couple with two children, and $12,120 for a married couple without children.
Claiming the EITC can return thousands of dollars to a household, tens or hundreds of thousands to a community, every year; yet every year billions of EITC dollars go unclaimed. One in four EITC-eligible tax filers don’t claim the benefit.
This sets the stage for organizations that sign up taxpayers for EITC “uptake” (as tax professionals term it) to feel good about the money they bring to their communities.
But a much better feeling, according to speakers at a well-attended Washington forum on the EITC, comes of putting the money to work in the community, either by paying down debts, salting it away in savings or financing a stake in a small-business enterprise. The typically few thousands of dollars available through earned income tax credits – and if one is eligible, these are actual dollars rather than reductions of a tax liability – can augment or take the place of a “micro” business loan, help to repair a credit record or beef up a bank account to the point where a small business loan is feasible. In any case, by putting more money to business purposes in Indian communities, EITCs can form part of an “enabling environment” that helps Native Community Development Financial Institutions complete their mission, according to Elsie Meeks, executive director of First Nations Oweesta Corporation.
Meeks spoke at an EITC gathering (part of a larger convening on Native CDFIs) whose main theme was to link the EITC to asset-building strategies in tribal communities. Instead of spending their windfall or virtually “found” money on consumer goods, EITC recipients can be directed financial education programs, financial planning or the Individual Development Accounts that “match” individual dollars with program dollars as an incentive to savings goals. The objects of the talks were tribal programs, which are positioned to reach the many Native families that do not file for the EITC, even when eligible.
Others who do file may be victimized by high-cost commercial tax preparers, or by high-interest refund-anticipation loans. To help taxpayers avoid these pitfalls, the Internal Revenue Service offers a free tax return preparation service for individuals of low to moderate income. A Volunteer Income Tax Assistance site can be found by calling (800) 829-1040.
Other speakers included Joanna Donohoe, a consultant on financial literacy in Native communities; Stewart Sarkozy-Banoczy, also of Oweesta; program officers of the Annie E. Casey Foundation in Baltimore, a longtime supporter of EITC “uptake” programs; Audra Highelk and Tom Klyve, of White Earth Investment Initiative in Minnesota; Jacqueline Johnson, of the National Congress of American Indians; John Wancheck, of the Center for Budget and Policy Priorities; policy staff for First Nations Development Institute, co-producer of two popular guides to claiming the EITC; and outreach specialists from the IRS and the Federal Reserve Board.
More information on the EITC is available either through tribal governments, local nonprofit organizations or tribal colleges or through the Internet at www.irs.gov/EITC, www.oweesta.org/eitc, www.firstnations.org or www.nfec.info.